SuddenDeath
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I found RIO interesting to examine, so I thought I'd go through it.
The first light (1) comes on the retreat from previous high, the second (2) on the re-test (you could have started building here with low risk, but that's another story since we were talking about breaks).
So along comes the break at 3 and the third lights glows. You might enter straightaway on the break but it's an insurance policy trade that you expect to lose because you anticipate some pull back - but it might not and plunge further without you. As an insurance policy trade you will want low risk, so stop will be somewhere in the reddish support zone, probably just above the previous bar's close and certainly just above the top of the support zone.
Easy in hindsight - but I have been in it
would a pairs trade simplify things?
or maybe create a pivot? and short below and go long above?
what about assuming a big drop in commodity prices and figuring out which company benefits? then doing a pairs trade.?
You plan to play the pullbacks from here, so looking for a breech of pullback lows. It comes after 4 where you go short on the breech with a stop above 4 and an expectation that you will at least reach the overlaid yellow support zone. Another light flickers on at this stage.
It gets into the zone, but comes back out so as do you and the last light goes out. Hold fire now until next break if it comes when repeat.